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Money is anything which is acceptable in settlement of a debt. But, paradoxically, the main asset used to settle debts in modern economies is other debts. After all, bank deposits are liabilities that the banks owe to their customers. Furthermore, we have seen that banks create liabilities against themselves when they make loans to their customers. In so doing, they are exchanging a debt which is not money for one which is money because bank deposits are acceptable in settlement of a debt. In other words, when a bank grants a loan it is effectively buying a debt which is not usable as money - otherwise it would be spent - in exchange for a debt which is usable as money. So why are banks able to create money? The answer is that their liabilities are acceptable in settlement of a debt because everyone has confidence that, on demand, these liabilities can be converted into cash. So long as this confidence is maintained, bank liabilities will always be acceptable in settlement of a debt, and will always therefore be money.
Economic functions of money - A medium of exchange This is its most important role. Without money we would live in a barter economy where we would have to trade goods and
Compare Money with wealth and income Money isn't the same as wealth. An individual may be very wealthy however have no money (for instance by owning stocks and real estate). An
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what are the model of money supply
Burwood Mining is raising capital of $500,000 for its next project from the following sources: Sources Amount $ Common stock 100,000
Consider the following Marginal Private Cost (MPC), Marginal Social Cost (MSC) and market demand curves. These curves relate to a market for a product, the production of which gene
Assume a competitive industry with two hospitals. The hospitals compete in price (such that P = MC ), face the inverse demand curve =10 - Q , and have a constant marginal cost of
Give your own example of "pseudoreplication" (sensu Hurlbert 1984) in an experiment. How does pseudoreplication cause problems for correct inferences from experiments?
Government and Price-Determination can be understood as follows: The government might intervene in the market and mandate the maximum price (price ceiling) or the minimum price
Q. Describe the classical model of macroeconomics? 'The classical model' was a term coined by Keynes in the 1930s to signify essentially all the ideas of economics as they appl
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